Sovereign funds favour equity investments for next 12 mths-survey

Reuters

Dec. 7, 2017, 07:52 AM

LONDON, Dec 7 (Reuters) - Sovereign wealth funds broadly
plan to raise exposure to international equities in the coming
12 months, a survey showed, suggesting that the stock market
bullrun is set to continue.

The survey, conducted by the U.S.-based Sovereign Wealth
Fund Institute, covered 26 funds with an estimated $2.18
trillion in assets under management. It was carried out in
November, a period when global equities pushed to record highs,
raising questions about the rally's longevity.
The results, sent to media late on Wednesday, showed some 41
percent of funds were planning overweight positions in equities
in actively-managed strategies.

Another 41 percent of respondents said they would hold
exposure to the asset class "at the same level" and two-thirds
said the same for passively-managed international equities.

The funds as a whole have been net sellers of
publicly-listed securities held through third-party asset
managers over the last 13 quarters, according to separate data
from research firm eVestment.

But the Institute survey, which consulted asset owners
directly, showed a sizeable portion were interested in staying
invested.

The biggest shift was towards emerging equities, with 66.7
percent planning to overweight this sector, which is one of this
year's strongest performers with returns of almost 30 percent.

In terms of sectors, information technology and consumer
staples were cited as the biggest planned overweights, with 19
percent opting for each of these. Real estate was singled out by
17 percent of respondents as a potential 2018 overweight.

There were also signs of concern about equity valuations.
Eight respondents said a stock market bubble was the biggest
tail risk, while the Institute's September poll had found only
three funds identifying this as the main risk.

Technology shares have rallied
hard for most of this year, but have sold off over the last week
as investors have begun to rotate out of tech and into
financials, betting on U.S. deregulation and tax cuts.

U.S. tax reform was cited by nine respondents as likely to
be the biggest driver of equity prices in the next six months
.

Looking at geographical allocations not limited to equities,
a third planned to overweight Europe excluding Britain, 21.7
percent said the same for Japan, and 20.8 percent favoured the
United States.

Emerging market debt also remained in favour, with 28.6
percent saying they planned to overweight this sector in the
next 12 months, and another 9.5 percent aiming to
"significantly" overweight it.
(Reporting by Claire Milhench; Editingby Richard Balmforth)